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Financial Sector Rescue Programs: Domestic and Cross Border Effects
Journal of International Money and Finance, 2022, 127, 19 Seiten, https://doi.org/10.1016/j.jimonfin.2022.102694
We assess the effectiveness of the financial sector stabilisation measures taken by the Austrian authorities in the wake of the global financial crisis. Employing an event study methodology, we evaluate domestic and cross-border effects involving Central, Eastern and South-eastern European economies. We identify recapitalisations and public guarantees as the most effective sovereign interventions. Both mitigate financial market stress at home and abroad. However, a risk-shifting effect emerges at the sovereign's expense which undermines their effectiveness relative to monetary policy interventions. Moreover, in complement to the actual implementation, the mere announcement of interventions already mitigates financial market stress, underscoring the extent of policy credibility.
JEL-Codes:E58, E65, G14, G18, G28
Keywords:Financial market stress, Spill-overs and financial contagion, Policy interventions, Interacted Bayesian VAR, Event study analysis
Forschungsbereich:Makroökonomie und europäische Wirtschaftspolitik
Sprache:Englisch